More inclusive growth will boost quality of global recovery

The year 2016 was full of global turmoil and choas which led to a global slowdown, in spite of this, global growth is now expected to rebound to 2.7% in 2017 and then further accelerate to 2.9% in the next two years,ET Online | January 11, 2017, 16:57 IST

Global growth which has stagnated and declined in recent years is now expected to bounce back says the most recent edition of the Global Economic Prospects 2017, brought out by the World Bank. This is a remarkable turnaround from the scenario in the last three years which has seen growth decelerate from 2.7% in 2014 and 2015 to 2.3% in 2016. Global growth is now expected to rebound to 2.7% in 2017 and then further accelerate to 2.9% in the next two years. Though this is substantially lower than the 4% growth achieved in the global boom years it is still a remarkable comeback given the current scenario.

However a number of factors makes the recovery in 2017 more remarkable. For one the pickup in global growth is accompanied by a doubling in growth of trade volumes. Secondly it is more inclusive encompassing high and low incoming countries and thirdly it encompasses most of the major regions including very poor regions.

Global trade recovery is a big boost for countries like India where the economic recovery has been constrained by the fall in external demand for goods and services. More so because the recovery is impressive as it reverses past trends when growth of trade volumes slumped from 3.7% in 2014 to a low of 2.5% in 2016. The pickup in the global economy will now boost global trade growth to 3.6% in 2017 and further to 4% in 2018.

The global recovery is also expected to boost growth in developing countries faster than in high income economies. While growth in high income economies is expected to perk up from 1.6% in 2016 to 1.8% in the next two years, that in developing economies will surge from 3.5% to 4.8% during the period. However the gain in high income economies is mainly limited to the United States. Growth is even expected to slowdown in the Euro Area and Japan.

Growth will however encompass almost all major regions among emerging and developing economies. One of the biggest gainers is Sub Saharan Africa where growth is expected to more than double from 1.5% in 2016 to 3.7% in 2019. Developing countries in Europe and Central Asia is the other major gainer with growth zooming from 1.2% to 2.9%. Latin America and Caribbean will also see growth improve from a negative 1.4% to 2.6% over the 4 years.

South Asia, bolstered mainly by India, will see growth perk up from 6.8% to 7.4% making it the highest growing regions across the world. The only major causality is expected to be East Asia and the Pacific where growth is expected to decelerate from 6.3% in 2016 to 6.1% in 2019 mainly because of the slowdown in China where growth will decelerate from 6.7% to 6.3% during the period.

However, all other Brics countries are expected to do well with India leading the group. Brazil and Russia will post a smart recovery from recession while South Africa will see growth accelerate almost fourfold albeit from very low levels.

About the author: Pyaralal Raghavan, works as Senior Assistant Editor on the edit page of the Times of India.

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